The Tesco share price is on the rise. Should I buy for September?

The Tesco (LSE: TSCO) share price has risen by around 4% in the last five days at the time I’m writing. With other major supermarket chains such as Morrisons seeing exponential rises this past month, could Tesco also follow suit moving into September? 

This year has produced a lot of difficulty for Britain’s largest retailer. Moving into the second half of 2021, is it possible for Tesco to finish strongly or will its lacklustre performance only continue? Here I examine whether or not Tesco shares are a strong buy for me. 

The bullish case for the Tesco share price

It’s important to remember that Tesco is still the UK’s biggest retailer. So when a company of this size has an underperforming share price, there is always the possibility that I can make a decent profit from its undervaluation.

Tesco has the experience and expertise to stay around for generations to come. When I’m thinking of a major long-term investment, choosing a company that has become part and parcel of the marketplace is a sign of sustainability and security in investment for me.

I feel that getting the basics right for an investment is essential. It would be unwise of me to disregard Tesco’s fundamental success over the past decade. This is based on the fact that its revenue has grown from £54bn in 2016 to £57bn in 2020. 

Tesco has also come out strong in its FY21 report. Group sales were up by 7.1% to £53.4bn, retail cash flow rose by 29.8%, net debt dropped by 2.8%, and the dividend per share remained unchanged at 9.15p. This was also bolstered by its more recent Q1 report with like-for-like sales growing by 9.3%. Overall, the company is continuing to perform well in uncertain conditions. So why is the share price underperforming? 

Bearish factors for the Tesco share price

Although Tesco is still the largest supermarket chain in the country, competition is rising. Morrisons, as mentioned before, is seemingly upping its game with the completion of its momentous takeover by Clayton, Dubilier and Rice (CD&R). The Sainsbury and Marks and Spencer shares are also performing better than Tesco. The drop in the Tesco share price could simply be a result of its competitors’ share prices rising. 

Tesco is also fearful of another shortage in the supply chain heading into Christmas. However, a shortage of drivers, in part caused by Brexit, should affect the majority of supermarket chains and not just Tesco. 

Should I buy for September?

I’m uncertain on what the future holds for Tesco in the near future. I think it is very possible that the Tesco share price could face more problems moving into September. My reasoning is based on the shroud of mist regarding how Tesco has performed now restrictions have been lifted. On this basis I think the next financial report could be quite telling for what direction it will go in. 

So, for now I will hold off buying Tesco shares, although I do believe that in the long-term the UK’s biggest retailer would be a profitable investment for me.